Post navigation

Markets: Down Syndrome

Looked earlier this morning like the market would drop another 45, or so, at the open this morning.

Part of that is because what had been a global loosening of money has now ended, at least for a while, and that means that the Fed Meeting that begins today (announcement tomorrow) will be filled with the usual selection of carefully chosen words, but nothing will change.

I like the use of words that imply superiority…these are often used in government monetary pronouncements of monetary policy worldwide.

“The Committee judged…” is one of my favorites. Implied is that we should “all rise” to the bait. A closely related one (“blah, blah, reviewed the evidence…”) also gets pulled out.

A third and fourth are “concluded” (as in that’s the end of it) and “determined.”

If you’re any good with Excel, you can build your own Fed Statement generator. Use the Random Number function to generate a word picker, which is run against a data table where the Language of FedSpeak as been carefully compiled.

Then use test handling functions (like concatenate) to build the statement.

The Federal Reserve today announced no change in its rate policy. The Committee (word_lookup_1) the data and (word_lookup_2) that in keeping with our (ran dom_policy_cite_1) the best possible course would be no action at this time.

Going forward, the Committee will closely watch (worry_item_1) and (worry_item_2) for any indication of deviation from target rates.

It’s actually only slightly more complicated, but you get the idea.

Which leaves the average investor (me and you) trying to figure out what to make of it. Marty Zweig famously advised “don’t Fight the Fed” and since Interplanet Janet (IJ) has been doing astronomical things with the money supply, we she speaks, we listen.

You don’t need a strategic trader’s mindset, under theory Z…just listen to the Fed. If they say overprices, then sell and go to cash, or go short. When IJ’S FedSpeak turns to “fairly priced” then it’s time to invest again on the long side.

It’s never THAT simple. There are all kinds of billionaires running around trying to shave money from everyone’s take (except their own) and that means things like whipping up the War Machine and so forth.

Then there’s the whole matter of trying to blow up Greece…someone’s got to make an example of what happens when you cross the bankster because the Irish sort of won, and the Icelanders did for sure,. so at some point, the banksters need to hand out a beat down to gain back their ill-deserved “respect.”

As for actual data? Who needs it…this is a con game, after all…but if’n you do….

Housing Start Data

Just out from Census:

“The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residentialconstruction statistics for May 2015:BUILDING PERMITSPrivately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,275,000. This is11.8 percent (±1.8%) above the revised April rate of 1,140,000 and is 25.4 percent (±2.1%) above the May 2014 estimate of 1,017,000.Single-family authorizations in May were at a rate of 683,000; this is 2.6 percent (±1.2%) above the revised April figure of 666,000.Authorizations of units in buildings with five units or more were at a rate of 557,000 in May.HOUSING STARTSPrivately-owned housing starts in May were at a seasonally adjusted annual rate of 1,036,000. This is 11.1 percent (±10.4%) below therevised April estimate of 1,165,000, but is 5.1 percent (±11.2%)* above the May 2014 rate of 986,000.Single-family housing starts in May were at a rate of 680,000; this is 5.4 percent (±7.0%)* below the revised April figure of 719,000.The May rate for units in buildings with five units or more was 349,000.HOUSING COMPLETIONSPrivately-owned housing completions in May were at a seasonally adjusted annual rate of 1,034,000. This is 4.7 percent (±13.8%)*above the revised April estimate of 988,000 and is 14.5 percent (±14.4%) above the May 2014 rate of 903,000.

Here is the annual start rate data over the longer term, courtesy of the Federal Reserve chart system with an arrow toward this this morning’s data….

Will the REAL Long Wave Please Stand Up?

Specifically, there are some who believe that the Fed is in a position where they are trying to avoid the problem of prematurely raising rates, as one analyst thinks happened in 1937.

It’s an interesting notion. Just wrong.

You see, I keep a history of the Fed discount rate handy just as a fact check and here’s how it looked from the middle of the Depression to the start of WW II:

Here’s the Historical Fed Discount Rate per Minneapolis Fed Data Set:

So when an analyst says he believes that the Fed is trying to avoid the same problems of 1937, sorry Charlie.,..but that’s not the right data, the way I read it.. The Record says the fed actually lowered rates in 1937. Hello?

The upper horizontal arrow in the following chart is where I think this current decline will stop.

So, no, I don’t buy it. I hold that the real deal is we are late in the analog to 1927 and while we may have a modest decline, it won’t be the end of the world. And within a year we ought top be screaming past new highs if the replay of earlier times continues. So line up the bottom of 2009 with the last market break in 1921 and you will be astounded as what’s possibly ahead:

Normally, I don’t whip out a Peoplenomics® chart, but this screams for rebuttal, but there’s the replay the way I see it…so yeah, I don’t see 1937. And if the Fed sees it as a replay of ‘37, they’re even dumber than me. (Which would be going a fair piece…)

The mechanics of the blow off are simple: When rates begin to rise, we will see some of the $37-trillion in bonds go chasing $20 trillion in stocks and the bubble will result. I will get rich, then I will go short, and then I will move up to a bigger airplane. When the Fed raises rates this fall, you’ll see…gold will go toward 3,000 and OMG it should be fun.

Post navigation

Comments

Markets: Down Syndrome — 7 Comments

Check those Housing numbers again …
“but is 5.1 percent (±11.2%)* above the May 2014 rate”
Which translates to …
‘but is somewhere between 6.1% *below* to 16.3% *above* the May 2014 rate”
This is truly worthless data.
…STeve

It’s all just rats on a sinking ship. Some are hoping for rescue (it’s not coming) some will find a large enough piece of flotsam to live out their natural lives cannibalizing and scavenging, most simply will struggle in the chaos until it ends.

Some just decided not to get on the ship, no longer allured by the promise of profits, toys and adventure, realizing the unavailability of good ships, reliable shipmates and sane officers to guide the journey.

To paraphrase something from basic training, “call me anything you want, but call me long distance!”

I’m on a roll and then I have to get some work done. I’m guessing based on the continuous departures from Deutsche Bank that Greece is finished this weekend and if so we may witness the largest bail in ever known to man as Deutsche and it’s derivatives portfolio blows sky high – fallout would be unknown – but it may foster QE4 all entirely for Germany… my suspicions have been that the real reason this has been drawn out is so that they could try to mitigate the damage to the portfolio.

George – with all due respect my notion is the polar opposite to yours – shocked right? If the Fed raises rates implying that bond prices will go down and therefore yields up – this is assuming Mr. Yellen actually ever raises rates (she’s done a pretty good job of talking them up so far) It will cause a major sell off in an overpriced equity market especially in equities purchased for dividends as they will move from stocks to Government Guaranteed alternatives IE treasuries or highly rated muni’s. Everyone knows the outer bounds of any rate increase – presently roughly 65 basis points or essentially 2 raises of 25 bp – how did I arrive at that – the 10 year cannot go beyond 3% or the debt simply can’t be serviced and everyone will finally know the show has just ended…your mileage may vary